Mahim Property

The Maharashtra Rent Act

The Bombay Rents, Hotel and Lodging House Rates Control Act 1947, popularly known as the Bombay Rent Act has for long been a controversial issue.

It now comes under the umbrella of the general Maharashtra Rent Control Act; this is as against the three different Acts existing earlier for the Bombay State, Vidarbha and Marathwada. Thus, it is now a relief that at least there now exists a common, permanent law with regard to rent control.

The Maharashtra Rent Control Act was sanctioned by the President of India, Mr. K. R. Narayanan on March 8, 2000. It was brought into effect from March 31, as the old temporarily amended Bombay Rent Act was expiring that day.

The Act has been mired in controversy and has consumed reams of newsprint, the principal controversy being the freezing of rents at the 1940 levels.

One can't please all the people all the time, and as it so happens, the new act has found critics among both the landlords and the tenants.

The new act says that the rent may be increased by five per cent in the first year, after which landlords would be permitted to raise the rent by four per cent every year following that. This follows the Apex Court's directive to frame a fair law regarding the issue of rents being frozen at 1940 levels. They are also permitted to increase the rent by a reasonable amount, if any structural repairs are carried out on the building.

The landlord associations are displeased with the "small" five percent increase while several tenants' rights bodies feel that the rents will escalate exorbitantly and therefore it is not a fairly framed act.

However, to fully understand this drama, one needs to dig into the past to have full cognizance of the sequence of events.

1947-1993: As per the Bombay Rent Control Act, the rents were frozen upto the 1947 levels.

October 1997: The landlords moved the Supreme Court, citing injustice.

December 1997: On December 19, 1997, acting on appeals filed by several property owners in Mumbai, the Supreme Court said that the process of defining and fixing of the standard rent (the highest rent the Act permits a landlord to charge) according to this Act was "no longer reasonable". The court also said that the extension of these provisions beyond March 31, 1998 (the last day of the previous extension) would be "invalid" and "of no consequence".

Standard rent indicates the rent at which the premises were let on September 1, 1940. If not let on that date, it means the rent at which they were last let before that date; where they were first let after that date, it means the rent at which they were first let. This is so except in those cases where it has been fixed under the rent control Acts of 1939 and 1944, and in special cases fixed by the court under the 1947 Act.

The Bombay Rent Act, which applied only to private premises, provided that rent in excess of the standard rent is illegal except where an agreement entered into before September 1, 1940 provides for periodic increases. However, it did permit rent increases under certain conditions, for example, in the case of -Premises that receive the benefit of improvements or special additions - Premises that are subjected to special or heavy repairs.

The apex court expressed the hope that the State legislature would enact a new rent control Act with effect from April 1, 1998 taking into consideration, among other things, the model rent control legislation that the Union Government circulated among the States in 1992.

The model law, besides providing for much higher rents than what is payable under the Bombay Rent Act, made the eviction of tenants easier by providing for the setting up of a parallel judicial process with only one court of appeal after removing the civil courts' jurisdiction over the matter and summary litigation procedure. It also provided for severe curbs on the right of inheritance of tenancies.

This sent shock waves among the tenants as the result of all this would be a steep hike in rents.

January 1998: On January 19, the State Government filed a petition in the Supreme Court pleading for a review of the December 19 judgment. The petition stated that the March 31, 1998 deadline set by the Supreme Court for the enactment of a new law was "too close" and prayed for the grant of "adequate time". Review petitions and intervention petitions were filed by the Federation of Old Buildings Cooperative Housing Societies, the Action Committee for Protection of Tenants' Rights and other organisations.

After hearing the matter on March 19 and 24, the Supreme Court declined to pass orders on the Government's request for permission to continue with the existing Rent Act beyond March 31.

The Bench made it clear that the court would keep the Government's review petition pending until April 17, the date of the next hearing. This forced the Government to bring new legislation into effect by the end of March lest there be a legal vacuum on the rent question between April 1 and 17, if not beyond that date. The Government therefore took recourse to a temporary legislative measure that was passed by the State Assembly on March 26 pending the enactment of a unified rent control law applicable to all the regions of Maharashtra. (The Bombay Rent Act is applicable only to specified areas in those parts of Maharashtra that correspond to the Bombay State prior to its reorganisation).

The new legislation, which expires on March 31, 1999, differed in only one aspect from the existing Act. It had an additional section that read as follows:

With effect from 1987, a landlord was permitted, subject to certain conditions, to increase the rent on premises in respect of which he or she was required to pay the government, a local authority or a statutory authority any fresh levies (or increase in existing levies) such as 'rates, cess, charges, tax, land assessment and ground rent of land.'

The Bombay Rent Act has been extended around 20 times. In its December 19, 1997 judgment, the Supreme Court observed that the pegging down of rents to the pre-War stage and even thereafter was no longer reasonable.

February 1998: In its intervention petition in the SC, the Juhu Vile Parle Development Scheme (JVPD) Tenants and Residents Association pleaded with the court to set aside the December 1997 ruling. It added that the arbitrary rise in rents would cause great misery to the public.

March 1998: Since the Bombay Rent Control Act was supposed to lapse in March, the SC did not strike down the provisions, but stated that any extension would be unconstitutional. It asked the government to frame a fair law. The state government however, extended the act for a year within which landlords were entitled to make a five per cent increase in the rented premises let out before October 1987.

July 1998: A joint select committee (JSC) was established by the state government. Rumours were quite strong that the new Act would be likely to favour the tenants.

January 1999: Dissatisfied with the interim measure of five per cent rent hike, the landowners approached the SC again asking for the new rent legislation to be enforced immediately. On the other hand, the action committee of the Protection of Tenants' Rights also filed an intervention application.

The state government declared that it would issue a public notice asking all concerned parties, especially the various tenant bodies, to submit their suggestions. However a consensus existed in the Joint Select Committee on issues like the annual rent hike, legalisation of pugree, removal of rent control protection to public sector bodies and scrapping of rent control for new buildings.

Mid-January 1999: The apex court asked all concerned parties to file separate affidavits, explaining their stand on the issue.